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Comment by fujipadam | Hacker News Reader

As a hobby, I have been studying "oversold" stocks for the past month and am starting to see that the market is prone to over reactions. AMD and RTTR for example are stocks that were drastically punished for no good reason. I am assuming here is where Warren Buffet like folks buy. That said Twilio does seem to have a reason to tumble. The risk of losing WhatsApp also is too high for this valuation

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I think your assumption on Buffett is wrong. Buffett finds companies that have a significant competitive advantage (moat) and prefers stable, blue chip, traditional brand names, preferably with dividends, that are most likely to just keep growing. And then from that group, he finds the best pricing in industries he understands to be good businesses. Buffett wouldn't touch a company like AMD, punished or not. When Buffett does it right, he's specifically mitigated the risk of a stock getting punished well ahead of earnings.

I'm interested to learn what you've found on oversold stocks though - have anything written up?

I think there's maybe something tradable from over-reactions to short-term news, but buying on an "over-reaction dip" is fraught with peril that it's just the beginning of a prolonged fall.

I bought a bunch of UAL after the UA3411 incident came out and sold the last of it today for a tidy profit. Now, if their earnings had been lackluster or worse, that trade could have gone poorly.

I have also made money in aggregate on 3x oil ETFs, but the swings can be long and deep.

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